REG - THG PLC - Interim results
17/09/2024 07:15
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RNS Number : 4163E THG PLC 17 September 2024
17 September 2024
THG PLC
Interim results for the half-year ended 30 June 2024
Group continuing revenue and adjusted EBITDA growth of +2.2% CCY and +1.6%
respectively
Record H1 adjusted EBITDA across Beauty and Ingenuity helping to offset
transitory headwinds in Nutrition
Improving momentum in Nutrition, expected to exit Q3 in revenue growth
THG PLC to apply to transfer to the Equity Shares (commercial companies)
("ESCC") category
Progressing options to demerge Ingenuity, resulting in a highly cash
generative group
THG PLC ("THG" or the "Group"), announces its interim results for the
half-year ended 30 June 2024 ("H1 2024").
H1 2024 Group trading performance
£m H1 2024 H1 2023 1 (#_ftn1) YoY 2 (#_ftn2) CCY 3 (#_ftn3)
change change
THG Beauty 531.0 502.5 +5.7% +6.9%
THG Nutrition 299.9 336.7 -10.9% -7.5%
THG Ingenuity (external) 80.2 71.2 +12.6% +14.1%
Group (continuing) 4 (#_ftn4) revenue 911.1 910.4 +0.1% +2.2%
Discontinued revenue 22.9 58.9 -61.2% -60.7%
Total revenue 934.0 969.3 -3.6% -1.7%
Continuing adj EBITDA 5 (#_ftn5) 52.3 51.5 +1.6%
Continuing adj EBITDA % 5.7% 5.7% -
Adj EBITDA 6 (#_ftn6) 48.8 47.1 +3.6%
Adj EBITDA % 5.2% 4.9% +30bps
Operating loss 7 (#_ftn7) (84.4) (99.5)
Net Debt 8 (#_ftn8) (350.5) (268.3)
Matthew Moulding, CEO of THG, commented:
"The Group continued to deliver against its strategic priorities through H1,
with the performances of both Beauty and Ingenuity particularly strong.
Reporting another 6-month period of continuing sales and adjusted EBITDA
growth was especially pleasing given the FX headwinds suffered within our
Nutrition business, which negatively impacted H1 profitability by a further
c.£5m. Local manufacturing and fulfilment is now live in Japan which will
steadily scale to reduce exposure.
"Beauty revenue growth of +6% supported a record H1 adjusted EBITDA
performance, an improvement of c.170% as the business model changes we made to
focus on more profitable orders located closer to our global distribution
hubs, come to fruition.
"Further contract wins within Ingenuity is underpinning a steady acceleration
in external revenue growth following the repositioning of the business to
focus on higher value, multi-service clients. H1 adjusted EBITDA was a record
performance, up +227% YoY, almost double the previous best performance in H1
2021.
"The major rebrand of our Myprotein business is nearing completion, and
despite the transitory rebrand disruption this has brought, we have seen
positive reactions from global consumers, major offline retailers, and
licensing partners alike.
"Recent retail listings include GNC and Meijer in the US, as well as WH Smith
and Holland & Barrett in the UK. Within licensing, we entered into an
exciting new long-term partnership with Müller, with co-branded dairy
products launched across major retailers. Now the rebrand is largely complete,
our innovation pipeline will reaccelerate.
"Momentum in Nutrition is especially pleasing, with an expected return to
revenue growth in September, providing a strong platform for both peak trading
and the year ahead.
"Following the completion of the FCA listing regime review, we are taking the
appropriate steps to transfer to the ESCC category. We welcome the output to
simplify the listing regime, and expect the Group to be eligible for inclusion
in the FTSE UK Index Series.
"Finally, after extensive discussions with shareholders over the past 12
months, THG is progressing options to demerge THG Ingenuity, leaving our
highly profitable and cash generative global Beauty and Nutrition businesses
within THG PLC. The appropriate tax clearances have been received, while the
necessary separation work has previously been undertaken."
Outlook and guidance
· The second half of the year remains the Group's most profitable and
cash generative period, with revenue growth and seasonal weighting in Beauty
and Ingenuity expected to largely mitigate the Nutrition YoY decline.
· We are pleased with underlying trading patterns and notably a
recent improvement in Nutrition which we expect to exit Q3 in revenue growth,
supported by a recovery in average selling prices ("ASPs"). A key variable
beyond our control is the Japanese Yen headwind (H1 2024 impact: c.£5m),
however, overall we expect to be towards the lower end of the analyst
consensus EBITDA range 9 (#_ftn9) .
· Our estimates are supported by:
o Beauty and Ingenuity delivering YoY adjusted EBITDA margin progression for
the full year, with Ingenuity adjusted EBITDA anticipated to be ahead of
market expectations, noting the strong H1 performance and the new customer
wins in Q3.
o an improving revenue performance in online Nutrition as ASPs normalise
following the extensive global rebrand. Q3 exit revenue growth supports this
view, coupled with a similar 12-month revenue trajectory evidenced during the
previous Myprotein rebranding in 2018.
o offline Nutrition revenues continuing to deliver substantial growth, with
adjusted EBITDA margins already in line with medium-term guidance (c.12%),
supported by an increasing number of licensing partnerships.
o distribution cost and headcount management initiatives delivering a much
greater level of operational leverage.
· Year-end net debt is expected to be broadly unchanged YoY, with an
improvement in cash generated from operating activities and lower capex in H2.
Working capital improvements will come from the receipt of previously trapped
European VAT, and normalisation of the business mix between Beauty and
Nutrition.
· Nutrition adjusted EBITDA margin recovery back to medium-term guidance
(c.12%) in FY 2025 (FY 2023: 13.5%) will be supported by, normalising ASPs,
significant growth in offline retail and licensing sales, and a greater
proportion of Japan orders being locally fulfilled and manufactured.
H1 2024 segmental summary
£m THG THG Nutrition THG Ingenuity Other Central Inter-group elimination Continuing Discontinued categories H1 2024
Beauty Total Total
Revenue 531.0 299.9 80.2 - - - 911.1 22.9 934.0
Inter-segment revenue - - 225.6 - - (225.6) - - -
Total revenue 531.0 299.9 305.8 - - (225.6) 911.1 22.9 934.0
adj EBITDA 32.6 19.6 11.0 - (10.9) - 52.3 (3.5) 48.8
adj EBITDA % 6.1% 6.5% 3.6% - - 5.7% (15.4)% 5.2%
H1 2023 segmental summary 10 (#_ftn10)
£m THG THG Nutrition THG Ingenuity Other Central Inter-group elimination Continuing Discontinued categories H1 2023
Beauty Total Total
Revenue 502.5 336.7 71.2 - - - 910.4 58.9 969.3
Inter-segment revenue - - 248.8 - - (248.8) - - -
Total revenue 502.5 336.7 320.0 - - (248.8) 910.4 58.9 969.3
adj EBITDA 12.1 46.9 3.4 - (10.9) - 51.5 (4.4) 47.1
adj EBITDA % 2.4% 13.9% 1.0% - - 5.7% (7.5)% 4.9%
H1 2024 financial highlights
· Group CCY continuing revenue of £911.1m, +2.2% YoY, with strong
growth in Beauty and external Ingenuity helping offset online Nutrition.
· Total CCY revenue of £934.0m (-1.7% YoY) includes £22.9m (H1
2023: £58.9m) of revenue relating to discontinued categories as the Group
continued to execute its plan of business simplification and operations
streamlining. Group UK revenues grew strongly at +9.9%.
· Customer loyalty and direct engagement continues to build, driven
by App participation which accounted for 26.0% of Group D2C revenue (H1 2023:
16.1%).
· Adjusted gross margin remained broadly stable, with Beauty and
Ingenuity margin progression offsetting a lower than anticipated result in
Nutrition, driven by rebrand product clearance and the return of whey price
inflation through Q2. Gross margin has expanded in THG Beauty through online
retail, as previous actions to de-prioritise lower margin territories continue
to yield progress.
· Substantial reduction in adjusted distribution costs YoY to 11.5%
of revenue, reflecting the continued optimisation of the Group's automation
investment and ongoing efficiencies in the global delivery network. These
optimisations have accelerated the speed of order processing and delivery to
the end customer, enabling much later order cut off thresholds and shorter
delivery times from point of order. These market leading service standards to
customers, allied with the efficiency of operations are now playing an
impactful role in supporting Ingenuity recurring revenue growth.
· Administrative costs remain well controlled, with ongoing
refinements to marketing strategies and greater app participation helping to
offset inflation in marketing, and investment to enhance brand awareness.
Organisational effectiveness initiatives implemented in Q3 2024 will further
rationalise Group headcount YoY, as we drive a leaner structure to support
sustainable growth and margin progression.
· Continuing adjusted EBITDA for the Group was in line with prior
year (H1 2024: £52.3m vs H1 2023: £51.5m) at a margin of 5.7%, reflecting
effective management of costs, and the improving profitability of Beauty and
Ingenuity, offsetting lower Nutrition online ASPs, Asia FX headwinds and whey
input cost inflation. On a reported basis (inclusive of losses from
discontinued categories), adjusted EBITDA improved to £48.8m (H1 2023:
£47.1m).
· The successful exit of loss-making discontinued categories and
non-core assets generated a one-off non-cash charge of £9.3m, contributing to
the operating loss of £84.4m (H1 2023: £99.5m), an improvement of £15.1m
YoY.
· Underlying cash generation 11 (#_ftn11) improved c.12% over the
last 12 months (vs LTM June 2023), with an outflow of £63.8m (LTM H1 2023:
£72.6m). Working capital movements reflect ongoing inventory efficiencies and
sales mix towards Beauty (typically shorter payment terms for third party
suppliers), with capex investments largely into Ingenuity operational
infrastructure and platform development (a 25.2% reduction YoY).
· The Group had cash and available facilities of £457.7m at the
period end, and expects to refinance its existing debt facilities, largely
maturing in December 2026, within the next 12 months.
Business strategic and operational highlights
THG Beauty
· Stand-out performance delivered by THG Beauty with a record H1
adjusted EBITDA of £32.6m (H1 2023: £12.1m), following the successful
execution of the market prioritisation strategy, retail and own-brand revenue
growth.
· Volume recovery within beauty manufacturing (following prior year
destocking) alongside cost saving initiatives implemented during 2023, has
supported margin progression back to historical averages and in line with
adjusted EBITDA medium-term guidance (H1 2024: 6.1% vs H1 2023: 2.4%).
· Brand partnerships continue to strengthen with increasing share of
retail brand investment, curated edits to aid product discovery, and new and
exclusive launches notably within fragrance, indie and dermatological
skincare.
· Active customers in THG Beauty (LTM 12 (#_ftn12) : 8.4m, -1.6%),
reflects the strategic decision to target marketing investment towards more
profitable territories and products, whilst retaining higher spending and
higher frequency customers. This improvement in mix is delivering greater
profitability per order across a more efficient cost base. Active customers
were in growth across the UK, US and MENA key markets (LTM: +3.0%).
· Lookfantastic has significantly improved its UK brand equity
through Q2 13 (#_ftn13) , growing spontaneous brand awareness (+3%), brand
consideration (+7%) and brand preference (+18%), supported by 5* Trustpilot
scores. It continues to attract beauty enthusiasts into its loyalty scheme
(2.4m customers registered) with spend per customer over 20% higher.
· Following the announcement of a global licensing partnership deal
with luxury hotel amenities supplier Vanity group, THG Beauty's prestige own
brand portfolio is set to expand its presence into Park Plaza and Atour
hotels, capturing brand awareness in a further 46,000 rooms across the UK,
Europe and China.
THG Nutrition
· H1 adjusted EBITDA of £19.6m (H1 2023: £46.9m) was incrementally
impacted by c.£5m YoY due to continued FX headwinds in Asia, principally the
weaker Japanese Yen (Myprotein's second largest market). Following a two-year
project, local manufacturing recently commenced which will steadily scale to
reduce exposure to Japanese Yen FX movements.
· With the rebrand now largely complete, peak disruption from the
Myprotein rebranding has been felt. Performance was adversely affected by
stock rotation into the rebranded Myprotein packaging, impacting online ASPs,
which were c.11% lower YoY, with the smaller curated ranges for offline global
retail seeing minimal disruption.
· Promotional activity was higher than anticipated online as old
branded stock was sold through. Whilst this reduced online ASPs, this gave
more value to our online customers and protected developing offline
relationships by removing a need to use offline clearance channels. Myprotein
last underwent a rebrand in 2018, at which point ASPs reduced by c.8% (vs FY
2017 +c.8%), before returning to growth of +c.14% in 2019.
· Customer reaction to the rebrand has been positive, with brand
awareness, consideration and perception all demonstrating YoY improvements,
notably via connections to HYROX and Formula 1. Myprotein benchmarks highly in
driving customers efficiently through the funnel from consideration to
purchase, supported by an +18% increase in new app users YoY.
· Offline performance continues to be strong, helping to mitigate the
total brand sales decline to -6.8% CCY. The rebrand has been fundamental in
enabling access to new retail markets and partners, allowing Myprotein to
expand its reach and accelerate growth in retail and licencing. During the
first half, THG Nutrition has developed partnerships with:
o Müller to create a tailored range of high-protein dairy products that
cater for the active health-conscious customer. The long-term 'Müller x
Myprotein' collaboration has launched in a range of retailers, supported by
online and offline activations.
o Pre-eminent US specialist health retailer 'GNC', for in store distribution
to broaden awareness and complement the US D2C strategy. Building on
partnerships with Costco and Meijer.
o 'HYROX', the fastest growing mass participation sport, to develop a
performance range with hydration support in mind. The range is available D2C,
in addition to Sports Direct and Sainsbury's.
o Specialist UK food brand 'Kirsty's' to create a nutritionally balanced,
high protein 'on-the-go' and convenience range. Launching in Ireland in
October and available in selected UK grocers from Q1 2025, this partnership
takes Myprotein into a new fast-growing convenience category.
THG Ingenuity
· Further to implementing a simplified and focused go-to-market
strategy, substantial growth in high-quality external recurring revenues 14
(#_ftn14) has been delivered (+33% June), with new clients onboarded and a
strengthening pipeline.
· Substantially improved adjusted EBITDA margin performance (H1 2024:
3.6% / H1 2023: 1.0%), due to a planned shift away from lower-value clients
and a focus on more profitable services.
· Leveraging our investment in automated fulfilment capabilities,
during H1 we accelerated our business development focus towards clients
requiring fulfilment and courier management services to improve their checkout
to delivery experience. Improvements in order processing efficiency has
enabled a market-leading next-day delivery cut-off to 1am, meeting the
increasing demands from customers for shopping flexibility.
· Across the three pillars of e-commerce enablement; technology,
digital marketing and fulfilment, Ingenuity is the partner of choice for an
increasing roster of international brands and retailers. New and expanded
partnerships developed in key markets during H1 2024 included:
o CDS Superstores T/A wilko and The Range: Fulfilment and courier management
services for the home and garden retailer over a three year term, utilising
recent automation investment at THG Ingenuity's Omega distribution centre;
o Global partnership with HYROX, building on the successful THG Nutrition
collaboration. THG Ingenuity will provide a complete commerce solution of
technology, fulfilment and digital marketing services, enabling HYROX to build
on the brand demand and continue its rapid global growth;
o Holland & Barrett: Building on the recent D2C fulfilment partnership,
THG Ingenuity has extended its service offering into THG Studios for digital
creative and content production for a selection of new product launches in
support of their programme of change to become the trusted health and wellness
partner globally;
o Disney: Expanded strategic relationship to deliver creative production of
product and lifestyle content for Disney Store global sites, and television
commercial content plus user generated content for social platforms;
o ACG: Enabling the wellness innovation company to launch four full-service
e-commerce experiences for specialist brands Eimele and SRW in the US and ANZ.
An additional 15 sites (including UK) are due to launch across their portfolio
by the end of 2025.
UK listing regime review
In a separate announcement today, the Group announces its intention to
transfer the listing category of all its ordinary shares to the ESCC category.
Analyst and investor conference call
THG will today host a conference call and webcast for analysts and
institutional investors at 9.00am (UK time) via the following links:
To register for the webcast, please use the below link:
https://stream.brrmedia.co.uk/broadcast/66c4bd2ba1c3df3d282ca936
(https://stream.brrmedia.co.uk/broadcast/66c4bd2ba1c3df3d282ca936)
To ask questions, you must dial in via conference line using the below
details:
· Confirmation password: THG Interim Results
· UK dial in: +44 (0) 33 0551 0200
· US dial in: +1 786 697 3501
A playback of the presentation will be available on THG's investor website at
www.thg.com/investor-relations (http://www.thg.com/investor-relations) later
today.
For further information please contact:
Investor enquiries - THG PLC
Greg Feehely, SVP Investor Relations Investor.Relations@thg.com (mailto:Investor.Relations@thg.com)
Kate Grimoldby, Director of Investor Relations and Strategic Projects
Media enquiries:
Sodali & Co - Financial PR adviser Tel: +44 (0) 20 7250 1446
Victoria Palmer-Moore/Russ Lynch/Sam Austrums thg@sodali.com (mailto:thg@sodali.com)
THG PLC
Viki Tahmasebi Viki.tahmasebi@thg.com (mailto:Viki.tahmasebi@thg.com)
ENDS
Notes to editors
THG PLC operates three distinct businesses in Beauty, Nutrition and Ingenuity,
each scaled from the UK to hold global leading positions in their respective
sectors.
Cautionary Statement
Certain statements included within this announcement may constitute
"forward-looking statements" in respect of the group's operations,
performance, prospects and/or financial condition. Forward-looking statements
are sometimes, but not always, identified by their use of a date in the future
or such words and words of similar meaning as "anticipates", "aims", "due",
"could", "may", "will", "should", "expects", "believes", "intends", "plans",
"potential", "targets", "goal" or "estimates". By their nature,
forward-looking statements involve a number of risks, uncertainties and
assumptions and actual results or events may differ materially from those
expressed or implied by those statements. Accordingly, no assurance can be
given that any particular expectation will be met and reliance should not be
placed on any forward-looking statement. Additionally, forward-looking
statements regarding past trends or activities should not be taken as a
representation that such trends or activities will continue in the future. No
responsibility or obligation is accepted to update or revise any
forward-looking statement resulting from new information, future events or
otherwise. Nothing in this announcement should be construed as a profit
forecast. This announcement does not constitute or form part of any offer or
invitation to sell, or any solicitation of any offer to purchase any shares or
other securities in the Company, nor shall it or any part of it or the fact of
its distribution form the basis of, or be relied on in connection with, any
contract or commitment or investment decisions relating thereto, nor does it
constitute a recommendation regarding the shares or other securities of the
Company. Past performance cannot be relied upon as a guide to future
performance and persons needing advice should consult an independent financial
adviser. Statements in this announcement reflect the knowledge and information
available at the time of its preparation.
THG PLC
Interim results for the half-year ending 30 June 2024
Chief Financial Officer Review
Our H1 performance was characterised by profit improvements in THG Beauty and
THG Ingenuity from both a cash and adjusted EBITDA margin perspective, offset
by a more challenging performance in THG Nutrition.
· Group Adjusted EBITDA increased by c. £1.7m YoY on a reported
basis and £0.8m on a continuing basis, with luxury goods classified as
discontinued categories in the first half, following the sale to the Frasers
Group. Within this, we saw overall gross margin reflect the mix of the three
businesses including a marked improvement in Beauty sales performance.
Distribution costs saw a notable improvement YoY, with administrative spend
broadly neutral.
· THG Beauty adjusted EBITDA margin of 6.1% (H1 2023: 2.4%) has more
than doubled YoY following a return to revenue growth, the positive impact of
the strategy to focus on higher margin sales and the normalisation of
manufacturing profitability.
· THG Ingenuity revenue improved with double digit percentage growth
in external sales to £80.2m (H1 2023: £71.2m). This topline growth, combined
with cost efficiencies, more efficient fulfilment services and restructuring
activities led to adjusted EBITDA margin more than trebling YoY to 3.6%.
· H1 2024 has been a more challenging period for THG Nutrition than
anticipated, driven by online D2C channels with offline retail and licensing
continuing to make progress. Revenue was adversely impacted by stock rotation
into the rebranded Myprotein packaging, impacting online ASPs. Recent
volatility in whey commodities and persistent weakness of the Japanese Yen FX
headwinds from Asian currencies has also impacted key markets. The consumer
environment remains uncertain in specific territories where inflation and
rising interest rates have impacted the cost of living.
The Group operating loss decreased to £84.4m (vs H1 2023 £99.5m). Most
notably, distribution costs have reduced as a percentage of revenue, including
the rationalisation of headcount. Positive management actions continue with
the exiting of loss making categories. Cash adjusted items have reduced
substantially relative to historic levels, but were higher YoY at £10.5m vs.
£5.2m due to the restructuring actioned in the first half as well as the
costs of integrating Biossance.
Net debt before lease liabilities at H1 2024 totalled £350.5m (H1 2023:
£268.3m). Liquidity remains strong however, despite the weaker online
Nutrition performance, with cash of over £287.7m which when combined with the
undrawn RCF leaves c. £450m of liquidity. We have seen strong capital
discipline with capex spend in H1 of £53.9m vs. £72.1m in H1 2023. This
capital discipline combined with stable financing costs, and a continued
positive working capital trajectory, led to the last 12 months free cash
outflow being broadly consistent with year-end, but for the £52.0m disposal
proceeds received in H1 of 2023.
CONSOLIDATED INCOME STATEMENT
ALTERNATIVE PERFORMANCE MEASURES 15 (#_ftn15)
Six months ended 30 June 2024 Six months ended 30 June 2023
£'000 (Restated)
£'000
Movement
Adjusted gross profit 395,653 424,157 (28,504)
Gross margin % (adjusted) 42.4% 43.8% (1.4)%
Adjusted distribution costs (107,541) (143,713) (36,172)
As a % of total revenue 11.5% 14.8% 3.3%
Adjusted administrative costs (239,337) (233,349) 5,988
As a % of total revenue 25.6% 24.1% (1.5)%
Adjusted EBITDA 48,773 47,095 1,678
Adjusted EBITDA % 5.2% 4.9% 0.3%
EBITDA losses from discontinued categories 3,530 4,404 (874)
Continuing adjusted EBITDA 52,303 51,499 804
Continuing adjusted EBITDA % 5.7% 5.7% -
STATUTORY RESULTS
Six months ended 30 June 2024 Six months ended 30 June 2023
Before Adjusted Items Before Adjusted Items
Adjusted Items Adjusted Items
Total Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 933,969 - 933,969 969,260 - 969,260
Cost of sales (553,661) (8,896) (562,557) (554,721) (7,174) (561,895)
Gross profit 380,308 (8,896) 371,412 414,539 (7,174) 407,365
Distribution costs (117,469) (3,652) (121,121) (152,504) (3,715) (156,219)
Administrative costs (326,881) (7,826) (334,707) (330,090) (5,427) (335,517)
Other operating expense - - - (15,081) - (15,081)
Operating loss (64,042) (20,374) (84,416) (83,136) (16,316) (99,452)
Group revenue decreased by 3.6% to £934.0m in the first half (H1 2023:
£969.3m). This performance reflects the result of the Group exiting loss
making categories and territories. Revenue generated from the discontinued
categories has declined by £36.0m to £22.9m in H1 2024 compared to H1 2023.
Within continuing sales performance the principal drivers were:
- THG Beauty returning to growth after consciously prioritising
higher-margin sales and manufacturing sales returning to normalised levels;
- Strong improvements in THG Ingenuity external revenues, following
the continuation of the strategic repositioning and new contract wins with a
particular strength in the provision of fulfilment services;
- The growth in Beauty and Ingenuity was offset by a reduction in THG
Nutrition online revenue. This was driven by stock rotation and higher than
anticipated promotional activity linked to rebranding, continuing FX headwinds
from Asian currencies, volatility in commodity pricing and the consumer
environment remaining uncertain in specific territories.
Detailed analysis by each of the three businesses is included within the
segmental section later in this report.
Gross profit
Adjusted gross profit was £395.7m (H1 2023: £424.2m) equating to an adjusted
margin of 42.4% (H1 2023: 43.8%), a reduction of 140bps compared to H1 2023.
In H1 2024 certain fulfilment costs are reported under cost of sales. In H1
2023 these costs were reported under distribution costs. If reported on a like
for like basis, the H1 2023 adjusted gross profit would be 42.6%.
Gross profit on a statutory basis totalled £371.4m (H1 2023: £407.4m)
delivering a decreased margin of 39.8% (H1 2023: 42.0%). The reduction YoY has
been driven by Nutrition rebranding and stock rotation during the rebrand
phase, offset by a stronger mix contribution from Beauty and the margin
progress made in both Beauty and Ingenuity.
Within Nutrition, the challenging top line performance was compounded by
higher YoY input costs. Whilst 2023 saw whey pricing stabilise, H1 2024 has
seen a dislocation of commodity prices, with disproportionate increases for
specific product grades. Recently, a lower grade of Protein - Essential Whey -
was launched to broaden the customer proposition and provide alternative input
grades.
The Japanese Yen has been particularly challenging so far in 2024, peaking at
207Y/£ vs c. 160Y/£ at the same point last year, and 135Y/£ at IPO (a c.
47% devaluation since IPO in September 2020). This has all but eliminated
profitability in Myprotein's second largest market and we have had to reduce
promotional activity as a result impacting Myprotein's competitiveness within
the region.
Gross profit has strengthened in THG Beauty through online retail sales growth
(principally Lookfantastic, Cult Beauty and Dermstore) as previous actions to
prioritise higher margin sales and promotional strategies have come to
fruition. Beauty manufacturing has also returned to normalised levels
following the adverse impact of one-off destocking throughout 2023 which has
not recurred.
Ingenuity has benefited from stronger external revenue from new contract wins
including Holland and Barrett. The strategic pivot to higher margin, larger
enterprise clients and new partnership arrangements delivered in H1 2024 has
been a significant factor in revenue growth and achieving economy of scale
within the distribution and fulfilment network.
Distribution costs
Pleasingly, distribution costs on a statutory basis further reduced as a
percentage of sales by 320bps compared to H1 2023, culminating in a cost of
£121.1m (H1 2023: £156.2m), being 12.9% (H1 2023: 16.1%) of revenue and a
YoY decrease of £35.1m. If certain fulfilment related costs classified as
cost of sales in H1 2024 were reclassified in H1 2023 adjusted distribution
costs would still have reduced to £132.8m and 13.7% of revenue, representing
a decrease of £25.3m.
The Group has successfully leveraged established relationships across the
courier network, working closely with third party providers to optimise
operational flexibility, maximise efficiencies and negotiate competitive
rates, thus benefiting from economy of scale. Transportation surcharges of
£1.1m were taken within adjusting items primarily relating to the conflict in
Israel, these are lower than the prior year total surcharges and materially
lower than the historic covid equivalent.
Adjusted distribution costs of £107.5m (H1 2023: £143.7m) equate to 11.5%
(H1 2023: 14.8%) of revenue. This £36.2m improvement was driven by the
Group's continued focus on network optimisation and the expanded use of
warehouse automation. A second Autostore facility was launched in New Jersey
(US) in H1 2023, with associated benefits now embedded.
Administration costs
Adjusted administrative costs as a percentage of revenue totalled 25.6% of
revenue (H1 2023: 24.1%), with the increase primarily driven by marketing
investment with intentional spend focused on long term initiatives to build
brand engagement and awareness. In order to drive sustained sales growth and
profitability, the Group continues to focus its marketing investment towards
more efficient and cost effective channels.
Restructuring costs (H1 2024: £3.3m / H1 2023: £1.0m), incurred in H1 2024
relate primarily to headcount reductions, with further actions to be completed
during H2 2024 partially as a result of the discontinuation of loss-making
categories and territories. The impact of severance costs and wage inflation
is expected to be offset by future efficiencies, with the H1 restructuring
paying back on a cash basis by the end of the financial year.
Administrative costs on a statutory basis totalled £334.7m (H1 2022:
£335.5m), including share based payment charges of £8.5m.
Adjusted EBITDA and Adjusted EBITDA (continuing)
Reconciliation from Operating loss to Adjusted EBITDA Six months ended Six months
30 June 2024 ended
£'000 30 June 2023
£'000
Operating loss (84,416) (99,452)
Adjustments for:
Amortisation 32,758 35,832
Amortisation of acquired intangibles 24,326 25,503
Depreciation 47,241 45,927
Adjusted items - cash 10,529 5,192
Adjusted items - non-cash loss on disposal of discontinued categories 9,845 11,124
Other operating expense - non-cash loss on disposal freehold assets - 15,081
Share-based payments 8,490 7,888
Adjusted EBITDA 48,773 47,095
Adjusted EBITDA % 5.2% 4.9%
EBITDA loss from discontinued categories 3,530 4,404
Adjusted EBITDA before discontinued categories 52,303 51,499
Adjusted EBITDA before discontinued categories % 5.7% 5.7%
Adjusted EBITDA increased marginally to £48.8m from £47.1m in H1 2023. This
represents a margin of 5.2% (H1 2023: 4.9%), an improvement of +30bps, with
the margin improvements delivered through the Group's cost-reduction programme
and the exit of loss-making categories and territories as well as a strong
trading performance in Beauty and Ingenuity, helping to offset the Nutrition
D2C sales performance.
Positive and decisive management actions continue to support the Group's
ability to respond and rally against ongoing macroeconomic challenges, with
the impact of previous strategic decisioning being affirmed in the overall
performance of THG Beauty and THG Ingenuity. A comprehensive management action
plan is in place to address the sales performance in THG Nutrition.
Discontinued categories
At 31 December 2023, certain loss making categories and territories within THG
Beauty and THG Nutrition, were under strategic review. Subsequently, the Board
approved the exit of these categories and territories. These operations will
be fully exited throughout the course of 2024.
On 24(th) June 2024, the Group announced a strategic partnership with the
Frasers Group. As part of this arrangement, THG agreed to sell its portfolio
of luxury goods websites, including Coggles, to the Frasers Group. The sale
completed 11th September 2024, with the results presented as discontinued
categories. Associated assets have been impaired to realisable value and shown
within adjusted items as at H1 2024. The combined discontinued categories
contributed £22.9m (H1 2023: £58.9m) of revenue and an adjusted EBITDA loss
of £3.5m (H1 2023: loss of £4.4m).
We note these exits do not meet the criteria under IFRS 5: Discontinued
operations, as these categories and territories are not major components of
the Group as defined by the accounting standard. However, to provide further
information on the ongoing revenue and Adjusted EBITDA of the Group these have
been presented separately for H1 2024 and H1 2023 for comparative purposes.
Depreciation and amortisation
Total depreciation and amortisation costs were £47.2m and £57.1m
respectively (H1 2023: £45.9m and £61.3m). Included within amortisation is
£24.3m relating to acquired intangibles (H1 2023: £25.5m) reflecting the
amortisation of previous purchased intangibles.
Depreciation remained largely consistent reflective of the current asset base,
reflective of the material capex expansion programme across 2020 to 2022 now
being complete.
The Group has invested heavily in the platform over a number of years, with
investment and amortisation during H1 2024 reflective of this.
Operating loss
Operating loss before adjusted items totals £64.0m (H1 2023: £83.1m). This
loss was a result of the ongoing challenging macroeconomic environment
combined with the above mentioned factors. The actions taken to exit
loss-making categories and territories and a return to consumer spending are
expected to reduce this loss position in the medium-term, alongside an
improvement in the Nutrition D2C sales performance.
The Group incurred an operating loss in the period of £84.4m (H1 2023:
£99.5m). This is primarily driven by reducing costs during the first half and
partially offset by an increased share-based payment charges of £8.5m (H1
2023: £7.9m). In addition, other operating expense of £15.1m recognised in
H1 2023 relating to the non-cash loss on disposal following the sale of
non-core freehold assets has not recurred in the current period.
Finance costs net of finance income
Finance costs net of finance income have remained stable at £33.6m (H1 2023:
£33.6m) driven principally by higher interest rates, which have been caused
by higher interest rate environment. The inherent cost increase is offset by
a reduction in interest expense following the partial repayment of bank
borrowings in H2 2023.
Loss before tax and tax rate
Reported loss before tax was £118.0m (H1 2023: £133.0m). The effective tax
rate is 1.4% (H1 2023: -0.1%), based on a total tax charge of £3.1m (H1 2023:
tax charge £0.1m). The effective tax rate differs from the average statutory
rate of 25% (2023: 23.5%). This is primarily due to a movement in deferred tax
not recognised (-21.1%), and expenses not deductible (-2.1%). The
non-deductible expenses principally comprise of the share-based payments
charge and non-qualifying depreciation.
At 30 June 2024, the total net deferred tax liability is £53.4m (H1 2023:
£71.7m). The deferred tax liability in respect of intangible assets
recognised on consolidation was £126.8m (H1 2023: £142.4m). The deferred tax
asset in respect of tax losses recognised was £39.0m (H1 2023: £51.5m).
There were £100.7m of unrecognised deferred tax assets in respect of tax
losses at the balance sheet date (H1 2023: £74.4m). This non-recognition has
an impact on the income statement tax charge, and this is one of the primary
reasons for the effective tax rate being below the statutory rate.
Earnings per share
Loss per share was (£0.08) per share (H1 2023: £(0.10) per share).
Cashflow
H1 2024 LTM June 2024 H1 2023 LTM June 2023
£'000 £'000 £'000 £'000
Adjusted EBITDA 48,773 115,756 47,095 78,890
Working capital movements (74,380) 34,600 (60,802) 120,043
Tax paid (1,327) (5,142) (1,595) (4,942)
Adjusted items (10,458) (20,216) (5,282) (23,060)
Net cash (used)/generated in operating activities (37,392) 124,998 (20,584) 170,931
Purchase of property, plant and equipment (16,816) (34,348) (28,758) (76,966)
Purchase of intangible assets (37,121) (73,182) (43,307) (86,059)
Proceeds from sale of non-core freehold assets - 3,450 52,000 52,000
Other (37,122) (81,198) (38,084) (80,517)
Free cash flow 16 (#_ftn16) (128,451) (60,280) (78,733) (20,611)
Acquisition of subsidiaries net of cash acquired - (17,755) (2,504) (8,504)
(Repayments) / proceeds relating to bank borrowings - (26,800) - 156,000
Net (decrease)/increase in cash and cash equivalents (128,451) (104,835) (81,237) 126,885
Cash and cash equivalents at the beginning of the year 416,162 392,546 473,783 265,661
Cash and cash equivalents at the end of the year 287,711 287,711 392,546 392,546
Six-month free cash flow totals an outflow of £128.5m (H1 2023: outflow of
£78.7m) and £60.3m for the last twelve months (LTM). LTM free cash outflow,
is broadly consistent with the year-end, excluding the one off cash proceeds
of £52.0m received in H1 of 2023 from the disposal of non-core freehold
assets. Stability has been achieved through strong capex management and
working capital measures.
The cyclical nature of the business results in a working capital outflow in H1
each year, which reverses in H2.
The working capital outflow in H1 2024 of £74.4m has been adversely impacted
from H1 2023 due to higher Beauty volumes with suppliers operating on a
shorter payment term than Nutrition suppliers. Inventory has reduced by
£21.2m YoY with a two year reduction of £42.9m, albeit this reduction is
lower than the prior year as the stock portfolio normalises.
Cash outflows relating to financing activities have decreased in H1 2024,
following the repayment of borrowings in H2 2023, also reducing the interest
expense subsequently payable. Loans and other borrowings at H1 2024 were
£640.5m (H1 2023: £671.9m).
Total cash adjusting items have increased from £5.2m to £10.5m, primarily
relating restructuring costs. These actions will result in future cash savings
however.
There has been a reduction in the cash spend of £11.9m on the purchase of
property, plant and equipment in H1 2024, consistent with strategic decision
making. The Ingenuity platform continues to be developed, however intangible
related spend of £37.1m is down in H1 2024 by £6.2m compared to H1 2023,
reflective of the previous investment needed to build and maximise the
platform capabilities.
The Group ended the period with cash and cash equivalents of £287.7m (H1
2023: £392.5m, 31 December 2023: £416.2m) and the RCF remains undrawn,
following the extension agreed in H2 2023.
Segmental Summary(( 17 (#_ftn17) ))
Overview
H1 2024 £m THG THG Nutrition THG Ingenuity Central Inter-group elimination Continuing Discontinued categories 30 June 2024
Beauty Total Total
External revenue 531.0 299.9 80.2 - - 911.1 22.9 934.0
Inter-segment revenue - - 225.6 - (225.6) - - -
Total revenue 531.0 299.9 305.8 - (225.6) 911.1 22.9 934.0
Adjusted EBITDA 32.6 19.6 11.0 (10.9) - 52.3 (3.5) 48.8
Adjusted EBITDA margin 6.1% 6.5% 3.6% 5.7% (15.4%) 5.2%
H1 2023 £m THG THG Nutrition THG Ingenuity Central Inter-group elimination Continuing Discontinued categories 30 June 2023
Beauty (Restated) Total (Restated) Total
(Restated)
External revenue 502.5 336.7 71.2 - - 910.4 58.9 969.3
Inter-segment revenue - - 248.8 - (248.8) - - -
Total revenue 502.5 336.7 320.0 - (248.8) 910.4 58.9 969.3
Adjusted EBITDA 12.1 46.9 3.4 (10.9) - 51.5 (4.4) 47.1
Adjusted EBITDA margin 2.4% 13.9% 1.0% - - 5.7% (7.5)% 4.9%
THG Beauty 18 (#_ftn18)
£m H1 2024 H1 2023 Change %
(Restated)
Revenue 531.0 502.5 +5.7%
Adjusted EBITDA 32.6 12.1 +169.3%
Margin % 6.1% 2.4% +370bps
THG Beauty's return to revenue growth has contributed to margin accretion,
following previous investment in acquisitions, strategic reductions in
lower-margin sales and exiting loss making categories which have contributed
to an 3.7% improvement in adjusted EBITDA margin to 6.1%. Beauty loyalty
programmes and marketing strategy have driven a higher mix of spend through
more cost effective channels, with customer retention supporting a stable
AOV 19 (#_ftn19) of £61 per basket for H1 2024 (H1 2023: £62).
The adjusted EBITDA in THG Beauty manufacturing has materially increased
compared to H1 2023, following the one-off impact of destocking in the prior
year.
THG Nutrition 20 (#_ftn20)
£m H1 2024 H1 2023 Change %
(Restated)
Revenue 299.9 336.7 -10.9%
Adjusted EBITDA 19.6 46.9 -58.1%
Margin % 6.5% 13.9% -740bps
Whilst the rebrand has refreshed and engaged the customer base, ASP has been
adversely impacted through product availability as a result of stock rotation.
Revenue and margins have been further challenged during this phase as the
Group have undertaken extended promotional activity in order to clear stock
under the old branding whilst new packaging levels normalise.
As set out, the volatility in commodity pricing and FX headwinds have had a
significant impact on the Nutrition business, with adjusted EBITDA decreasing
principally as a result of the challenging top line performance, heavily
influenced by the weakness of the Yen. The movement in the exchange rate has
adversely impacted EBITDA by c.£5m in H1 2024. Local manufacturing commenced
in the half year and will lead to a partial natural hedge moving forwards.
Pleasingly our offline business comprising manufacturing, retail and
licensing, continues to make progress accounting for c.15% of H1 2024 revenue.
THG Ingenuity
£m H1 2024 H1 2023 Change %
External revenue 80.2 71.2 +12.6%
Internal revenue 225.6 248.8 -9.3%
Total revenue 305.8 320.0 -4.4%
Adjusted EBITDA 11.0 3.4 +227.1%
Margin % 3.6% 1.0% +260bps
The investments made across the Ingenuity offering over a number of years,
along with strategic re-positioning which commenced in Q3 2022, to focus on
higher value and higher margin clients to provide improved quality recurring
revenue, has started to crystalise particularly across fulfilment services. As
revenue scales and the revenue mix evolves further towards the technology
product offering we anticipate margins will further grow. This has been
positively demonstrated through services to Holland & Barrett and Frasers
Group during H1 2024 demonstrating THG Ingenuity's capability.
Internal revenue of £225.6m (H1 2023: £248.8m) relates to services provided
to the wider THG Group including platform fees, customer services, fraud
detection services, THG Studios, fulfilment, postage and marketing services.
This revenue is eliminated on consolidation. Internal revenue declined due to
the Group exiting loss-making categories and territories along with lower
sales in THG Nutrition, which in turn has generated lower volumes for THG
Ingenuity.
Central costs
£m H1 2024 H1 2023 Change %
EBITDA loss from central costs (10.9) (10.9) -
Central costs relate primarily to the PLC Board remuneration, professional
services fees, group finance, M&A, risk (insurance) and governance costs
that are not recharged to each business as they principally relate to the
operations of the PLC holding company. The costs remained consistent to H1
2023 with the Group cost saving initiatives expected to drive benefit in
future periods offsetting some aspects of inflation.
Adjusted items
In order to understand the underlying performance of the Group, certain costs
included within cost of sales, distribution, administrative and finance costs
have been classified as adjusted items.
The largest category of cost included within adjusted items are those relating
to non-cash loss on discontinued categories of £9.3m (H1 2023: £11.1m).
Six months ended Six months
30 June 2024 ended
30 June 2023
£'000 £'000
Within Cost of sales
Non-cash loss on disposal of discontinued and the exit of loss making 8,896 7,174
categories
8,896 7,174
Within Distribution costs
Transportation, delivery and fulfilment 1,089 1,228
Commissioning - new facilities 162 1,431
Decommissioning - 1,056
Restructuring costs 2,401 -
3,652 3,715
Within Administrative costs
Non-cash loss on disposal of discontinued and the exiting of loss making 385 3,950
categories
Non-cash loss on property portfolio restructure 564 -
Acquisitions - restructuring and integration 2,919 454
Other costs following the outcome of strategic review 657 -
Restructuring costs 3,301 1,023
7,826 5,427
Total adjusted items before tax 20,374 16,316
Tax impact (2,217) (1,220)
Total adjusted items 18,157 15,096
Cash adjusting items before tax 21 (#_ftn21) 10,529 5,192
For full details on each category of adjusted item see note 3 to the financial
statements.
Balance sheet
Cash and cash equivalents and net cash before lease liabilities
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Loans and other borrowings (640,522) (671,884) (650,037)
Lease liabilities (334,728) (321,312) (344,977)
Cash and cash equivalents 287,711 392,546 416,162
Sub-total (687,539) (600,650) (578,852)
Adjustments:
Retranslate debt balance at swap rate where hedged by foreign exchange 2,265 11,074 15,653
derivatives
Net debt (685,274) (589,576) (563,199)
Net debt before lease liabilities (350,546) (268,264) (218,222)
At H1 24 the Group held £287.7m in cash and cash equivalents, (H1 2023:
£392.5m). The €600m Term Loan B matures in December 2026 and the
incremental £131m senior-secured facility matures in Q4 2025.
In Q1, 2024, the RCF was extended by 17 months to May 2026. The £170 million
facility remains undrawn since IPO, and there were no changes to the financial
covenants or interest margin beyond the existing maturity date. From December
2024, the facility will be £150 million.
The extension affords the Group continued significant financial flexibility
during uncertain geo-political times. As at June 2024 the Group had c.£450
million of cash and undrawn facilities providing substantial liquidity.
Net debt before lease liabilities and adjusted for the impact of hedging was
£350.5m (H1 2023: £268.3m, 31 December 2023: £218.2m).
The increase in net debt period-on-period is driven by the reduction in cash
and cash equivalents. Cash was strengthened in H1 2023 as a result of one off
proceeds of £52m received following the sale of non-core freehold properties
which has not recurred in H1 2024. Cash includes £11.2m received from HMRC
received on the first working day of H1 24 but considered as free cash flow at
31 December 2023 for presentational purposes. LTM cash flows remain largely
stable with year-end adjusting for this and with capital spend reductions.
Non-current assets
Property, plant and equipment totalled £263.4m (H1 2023: £298.6m, 31
December 2023: £273.2m). Intangible assets totalled £1,185.3m (H1 2023:
£1,224.9m, 31 December 2023: £1,207.4m). Whilst the Group continues to grow
the asset base consummate to strategic priorities, capital spend has reduced
following periods of more significant investment whilst developing the
platform capabilities.
Going concern
The Group remains in a strong cash position with cash and cash equivalents
totalling £287.7m (H1 2023: £392.5m).
Net debt before lease liabilities totalled £350.5m (H1 2023: £268.3m). At 30
June 2023, the Group had a total of £170m in undrawn facilities.
The Group expects to refinance its existing debt facilities largely maturing
in December 2026 within the next 12 months.
In making their assessment of going concern, the Directors reviewed financial
projections until 30 September 2025 and considered the redemption of the UKEF
debt facility shortly thereafter in October 2025.
Stress test scenarios were modelled to take into account severe but plausible
impacts of a combination of the principal risks occurring simultaneously, as
well as a reverse stress test.
In response to the ongoing uncertainty in the macroeconomic market, high
inflation and global recessions, Management modelled stress tests across
multiple scenarios. These included adjusting for a reduction in revenue across
all divisions, impacting both direct to consumer and business to business
markets, along with an increase in cost base across key inputs, with the focus
being on commodity prices. The results of stress testing demonstrated that
the combination of mitigating actions available including existing cash
resources, level of discretionary spend, working capital optimisation and
ability to utilise the RCF were sufficient for the Group to withstand such
impacts. A reverse stress test was modelled to identify the point at which
liquidity is exhausted. The model would have to see a significant decline in
revenue and margins compared with the stress test set out above. Such a
scenario, and the sequence of events which could lead to it, is considered to
be remote. For these reasons, the Directors continue to adopt the going
concern basis in preparing these condensed interim financial statements.
Responsibility statement of the directors in respect of the condensed interim
financial statements
We confirm that to the best of our knowledge:
· the condensed set of financial statements for the half year ended
30 June 2024 has been prepared in accordance with UK adopted IAS 34 Interim
Financial Reporting;
· the interim management report includes a fair review of the
information required by:
o DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the 2024 financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
o DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
Matthew Moulding
Damian Sanders
Chief Executive Officer
Chief Financial Officer
16 September 2024
16 September 2024
Interim condensed consolidated statement of comprehensive income for the six
months ended 30 June 2024
30 June 2024 30 June 2023
Note £'000 £'000
Revenue 2 933,969 969,260
Cost of sales (562,557) (561,895)
Gross profit 371,412 407,365
Distribution costs (121,121) (156,219)
Administrative costs (334,707) (335,517)
Other operating expense 6 - (15,081)
Operating loss (84,416) (99,452)
Finance income 5,407 5,476
Finance costs (39,089) (39,040)
Loss before taxation (118,098) (133,016)
Income tax charge 4 (3,132) (67)
Loss for the financial period (121,230) (133,083)
Other comprehensive expense:
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translating foreign operations, net of tax 6,802 (26,687)
Net (loss) / gain on cash flow hedges (3,866) 6,704
Total comprehensive expense for the financial period (118,294) (153,066)
Loss per share (£'s)
Basic (0.08) (0.10)
Diluted (0.08) (0.10)
Earnings before interest, taxation, depreciation, amortisation ,adjusted
items, share-based payment charges and other operating expenses - non-cash
loss on disposal of freehold assets (Adjusted EBITDA)
30 June 2024 30 June 2023
Notes £'000 £'000
Operating loss (84,416) (99,452)
Adjustments for:
Amortisation 6 32,758 35,832
Amortisation of acquired intangibles 6 24,326 25,503
Depreciation 6 47,241 45,927
Adjusted items - cash 3 10,529 5,192
Adjusted items - non-cash 3 9,845 11,124
Other operating expenses -non-cash loss on disposal of freehold assets 6 - 15,081
Share-based payments 5 8,490 7,888
Adjusted EBITDA 48,773 47,095
Interim condensed consolidated statement of financial position as at 30 June
2024
30 June 2024 30 June 2023 31 December 2023 Audited
Note £'000 £'000 £'000
Non-current assets
Intangible assets 6 1,185,284 1,224,914 1,207,383
Property, plant and equipment 6 263,375 298,582 273,171
Right-of-use assets 6 286,786 281,443 303,635
Investments 7 1,400 1,400 1,400
Other non-current financial assets 7 8,413 17,988 7,999
1,745,258 1,824,327 1,793,588
Current assets
Assets held for sale 6.1 - 1,100 -
Inventories 298,909 328,983 297,143
Trade and other receivables 244,830 267,313 271,782
Other financial assets 7 5,318 5,222 1,915
Cash and cash equivalents 7 287,711 392,546 416,162
836,768 995,164 987,002
Total assets 2,582,026 2,819,491 2,780,590
Equity
Ordinary shares 7,225 7,072 7,072
Share premium 2,024,824 2,024,824 2,024,824
Merger reserve 615 615 615
Capital redemption reserve 523 523 523
Hedging reserve (26,548) (3,771) (20,020)
Cost of hedging reserve 27,945 20,958 25,283
FX Reserve 22,406 35,172 15,604
Retained earnings (1,143,800) (927,221) (1,032,234)
913,190 1,158,172 1,021,667
Non-current liabilities
Borrowings 7 608,087 631,789 621,011
Other financial liabilities 7 28,550 - -
Lease liabilities 7 288,661 275,942 301,440
Provisions 9 19,246 18,087 22,130
Deferred tax 53,405 71,692 55,698
997,949 997,510 1,000,279
Current liabilities
Contract liability 23,520 25,808 22,864
Trade and other payables 542,800 531,775 638,350
Borrowings 7 32,435 40,095 29,026
Current tax liability 3,224 1,952 1,266
Lease liabilities 7 46,067 45,370 43,537
Other financial liabilities 7 17,121 15,974 19,763
Provisions 9 5,720 2,835 3,838
670,887 663,809 758,644
Total liabilities 1,668,836 1,661,319 1,758,923
Total equity and liabilities 2,582,026 2,819,491 2,780,590
Interim condensed consolidated statement of changes in equity for the six
months ended 30 June 2024
Ordinary shares Share premium Merger reserve Capital Redemption reserve FX reserve Hedging reserve Cost of Hedging reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2024 7,072 2,024,824 615 523 15,604 (20,020) 25,283 (1,032,234) 1,021,667
Loss for the period - - - - - - - (121,230) (121,230)
Other comprehensive expense:
Impact of foreign exchange - - - - 6,802 - - - 6,802
Movement on hedging instruments - - - - - (6,528) 2,662 - (3,866)
Total comprehensive expense for the period - - - - 6,802 (6,528) 2,662 (121,230) (118,294)
Issue of ordinary share capital 153 - - - - - - - 153
Share-based payments - - - - - - - 8,490 8,490
Deferred tax effect in equity - - - - - - - 1,174 1,174
Balance at 30 June 2024 7,225 2,024,824 615 523 22,406 (26,548) 27,945 (1,143,800) 913,190
Balance at 1 January 2023 6,903 2,024,452 615 523 61,859 (6,221) 16,704 (803,096) 1,301,739
Loss for the period - - - - - - - (133,083) (133,083)
Other comprehensive expense:
Impact of foreign exchange - - - - (26,687) - - - (26,687)
Movement on hedging instruments - - - - - 2,450 4,254 - 6,704
Total comprehensive expense for the period - - - - (26,687) 2,450 4,254 (133,083) (153,066)
Issue of ordinary share capital 169 372 541
Deferred tax effect in equity - - - - - - - 1,070 1,070
Share-based payments - - - - - - - 7,888 7,888
Balance at 30 June 2023 7,072 2,024,824 615 523 35,172 (3,771) 20,958 (927,221) 1,158,172
Interim condensed consolidated statement of cash flows for the six months
ended 30 June 2024
30 June 2024 30 June 2023
Note £'000 £'000
Cash flows from operating activities before adjusted cash flows
Cash used in operations 8 (25,607) (13,707)
Income tax paid (1,327) (1,595)
Net cash used in operating activities before adjusted cash flows (26,934) (15,302)
Cash flows relating to adjusted items 3 (10,458) (5,282)
Net cash used in operating activities (37,392) (20,584)
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired - (2,504)
Purchase of property, plant and equipment (16,816) (28,758)
Proceeds from sale of property, plant and equipment - 52,000
Purchase of intangible assets (37,121) (43,307)
Interest received 5,407 5,476
Net cash used in investing activities (48,530) (17,093)
Cash flows from financing activities
Interest paid (18,364) (18,385)
Repayment of bank borrowings and fees (1,800) -
Repayment of lease liabilities (22,365) (25,175)
Net cash flow used in from financing activities (42,529) (43,560)
Net decrease in cash and cash equivalents (128,451) (81,237)
Cash and cash equivalents at the beginning of the period 416,162 473,783
Cash and cash equivalents at the end of the period 287,711 392,546
Notes to the interim condensed consolidated financial statements
1. Basis of preparation
a. General information
THG PLC (company number 06539496) is a public company limited by shares and
incorporated in England and Wales. It has a standard listing on the London
Stock Exchange and is the holding company of the Group. The address of its
registered office is Icon 1, 7-9 Sunbank Lane, Ringway, Altrincham,
Manchester, WA15 0AF. The Company is the parent and the ultimate parent of the
Group, the financial statements comprises the results of the Company and its
subsidiaries ("the Group").
The interim condensed consolidated financial statements of the Group for the
six months ending 30 June 2024 were authorised for issue in accordance with a
resolution of the directors on 16 September 2024.
The annual financial statements for the year ended 31 December 2024 of the
Group will be prepared in accordance with UK adopted IFRSs.
b. Basis of preparation
The interim condensed consolidated financial statements for the six months
ended 30 June 2024 have been prepared in accordance with UK adopted
International Accounting Standard 34 and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority. The
financial statements have been prepared on the historical cost basis, except
for derivatives which are held at fair value. The Directors consider it
appropriate to adopt the going concern basis of accounting in preparing the
financial statements of the Group.
The interim condensed consolidated financial statements do not include all the
information and disclosures required in the annual financial statements and
should be read in conjunction with the Group's annual consolidated financial
statements for the year ended 31 December 2023. As disclosed in note 1a, the
annual financial statements of the Group will be prepared in accordance with
UK adopted IFRSs.
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual consolidated financial statements for the
year ended 31 December 2023, except for the adoption of new standards
effective as of 1 January 2024. The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet effective.
Several amendments apply for the first time in 2024, but do not have an impact
on the interim condensed consolidated financial statements of the Group.
The IASB has adopted amendments exempting entities from accounting for
deferred taxes arising from Pillar Two legislation and these have now been
endorsed by the UK Endorsement Board (UKEB). THG PLC will apply the mandatory
temporary exception from recognising and disclosing information about deferred
tax assets and liabilities related to Pillar Two income taxes. The Pillar Two
rules are expected to apply from January 2024, at which time THG PLC is
expected to fall within scope.
The Group has performed an assessment of the Group's potential exposure to
Pillar Two income taxes. This assessment is based on the most recent
information available regarding the financial performance of the constituent
entities in the Group. Based on the assessment performed, all jurisdictions
should meet the Country-by-Country Safe Harbour provisions and management is
not currently aware of any circumstances under which this might change.
Therefore, the Group does not expect a potential exposure to Pillar Two top-up
taxes in any jurisdiction reviewed through this assessment.
Going concern
The Group remains in a strong cash position with cash and cash equivalents
totalling £287.7m (H1 2023: £392.5m, 31 December 2023 £416.2m). At 30 June
2024, the Group had a total of £170m in undrawn facilities.
Net debt before lease liabilities totalled £350.5m (H1 2023: net debt before
lease liabilities £268.3m, 31 December 2023: £218.2m).
The Group expects to refinance its existing debt facilities largely maturing
in December 2026 within the next 12 months.
In making their assessment of going concern, the Directors reviewed financial
projections until 30 September 2025 and considered the redemption of the UKEF
debt facility shortly thereafter in October 2025.
Stress test scenarios were modelled to take into account severe but plausible
impacts of a combination of the principal risks occurring including reducing
sales and gross profit margins for the three key businesses to levels
significantly below historic actuals and current budgets. A reverse stress
test was also separately modelled. The results of stress testing demonstrated
that the combination of mitigating actions available including existing cash
resources, level of discretionary spend and ability to utilise the RCF were
sufficient for the Group to withstand such impacts. For these reasons, the
Directors continue to adopt the going concern basis in preparing these
condensed interim financial statements.
c. Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, management is required
to make judgements (other than those involving estimations) that have a
significant impact on the amounts recognised and to make estimates and
assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are relevant. Actual
results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. In preparing these interim
financial statements, the significant judgements made by management in
applying the Group's accounting policies and key sources of estimation
uncertainty were the same as those applied to the Group's annual consolidated
financial statements for the year ended 31 December 2023.
2. Segmental reporting and revenue
The Group's activities were divided into the following segments: THG Beauty,
THG Nutrition, THG Ingenuity, Discontinued categories and Central PLC costs.
The results of each division are reported to the Board of Directors and are
treated as reportable operating segments. The following table describes the
main activities for each reportable operating segment:
Segment Activities
THG Beauty A digital-first brand owner, retailer and manufacturer in the prestige beauty
market, with a portfolio of own-brands across skincare, haircare and
cosmetics. Through its retail websites, including Lookfantastic, Dermstore,
Cult Beauty and the beauty subscription box brand GLOSSYBOX, it is a route to
market globally for over 1,400 third-party premium brands. THG Beauty also
operates prestige spa and experience venues, in addition to luxury clothing
and homeware D2C sites.
THG Nutrition A group of digital-first nutrition brands, which includes the world's largest
online sports nutrition brand Myprotein and its family of brands (Myvegan,
Myvitamins, MP Activewear and MyPRO), with a vertically integrated business
model supported by global THG production facilities.
THG Ingenuity THG Ingenuity provides a complete digital commerce solution for consumer brand
owners across its three pillars of technology, digital marketing and
operations. Being part of the THG group, Ingenuity is uniquely placed to bring
relevant, practical and international expertise in every area of commerce.
Discontinued categories Certain loss making categories and territories have been or are subject to
exit. These exits do not meet the criteria under IFRS 5: Discontinued
operations at the balance sheet date, as these categories and territories are
not a major component of the Group as defined by the accounting standard.
However, management report the financial results of these categories
separately in their reporting to the CODM, as such the result has also been
shown in the same format within this note.
Central costs relate primarily to the PLC Board remuneration, professional
services fees, group finance, M&A, risk (insurance) and governance costs
that are not recharged to the divisions as they principally relate to the
operations of the PLC holding company.
The CODM is the executive Board of directors, who make the key operating
decisions for the business. The CODM receives daily financial information at
the combined Group level, along with monthly information at a divisional level
and uses this information to allocate resources, make operating decisions and
monitor the performance of each of the businesses.
The measure of the Group's performance used by THG's management team is
Adjusted EBITDA comprising operating loss less interest, tax, depreciation,
amortisation, shared-based payments, adjusted items and other operating
expenses - non-cash loss on disposal of freehold assets. This is reconciled
to the nearest IFRS measure (loss before tax) in the below table.
Result before discontinued categories
H1 2024 THG Beauty THG Nutrition THG Ingenuity Central PLC Inter-group elimination £'000 Discontinued categories H1 2024
£'000 £'000 £'000 £'000 £'000 £'000 Total
£'000
External revenue 531,059 299,858 80,198 - - 911,115 22,854 933,969
Inter-segment revenue - - 225,628 - (225,628) - - -
Total revenue 531,059 299,858 305,826 - (225,628) 911,115 22,854 933,969
Adjusted EBITDA 32,646 19,640 10,966 (10,949) 52,303 (3,530) 48,773
-
Margin % 6.1% 6.5% 3.6% - - 5.7% (15.4)% 5.2%
Depreciation (47,241)
Amortisation (57,084)
Share-based payments (8,490)
Adjusted items (20,374)
Other operating expense (-)
Operating loss (84,416)
Finance income 5,407
Finance costs (39,089)
Loss before taxation (118,098)
Result before discontinued categories
H1 2023(( 22 (#_ftn22) )) THG Beauty THG Nutrition THG Ingenuity Central PLC Inter-group elimination £'000 Discontinued categories H1 2023
(Restated) (Restated) £'000 £'000 £'000 (Restated) Total
£'000 £'000 £'000 £'000
External revenue 502,549 336,663 71,202 - - 910,414 58,846 969,260
Inter-segment revenue - - 248,842 - (248,842) - - -
Total revenue 502,549 336,663 320,044 - (248,842) 910,414 58,846 969,260
Adjusted EBITDA 12,120 46,894 3,353 (10,868) 51,499 (4,404) 47,095
-
Margin % 2.4% 13.9% 1.0% - - 5.7% (7.5)% 4.9%
Depreciation (45,927)
Amortisation (61,335)
Share-based payments (7,888)
Adjusted items (16,316)
Other operating expense (15,081)
Operating loss (99,452)
Finance income 5,476
Finance costs (39,040)
Loss before taxation (133,016)
Below is an analysis of revenue by region (by destination):
Six months Six months ended
ended
30 June 2024 30 June
2023
£'000 £'000
UK 472,355 429,714
USA 162,555 183,209
Europe 188,479 207,748
Rest of the world 110,580 148,589
933,969 969,260
Below is an analysis of revenue before discontinued categories by region (by
destination):
Six months Six months ended
ended
30 June 2024 30 June
2023
£'000 £'000
UK 457,929 401,478
USA 157,489 164,680
Europe 186,592 202,305
Rest of the world 109,105 141,951
911,115 910,414
3. Adjusted items
Six months Six months ended
ended 30 June 2023
30 June
2024
£'000 £'000
Within Cost of sales 8,896 7,174
Non-cash loss on disposal of discontinued and the exiting of loss making
categories
8,896 7,174
Within Distribution costs
Transportation, delivery and fulfilment costs 1,089 1,228
Commissioning - new facilities 162 1,431
Decommissioning - 1,056
Restructuring costs 2,401 -
3,652 3,715
Within Administrative costs
Non-cash loss on disposal of discontinued and the exiting of loss making 385 3,950
categories
Non-cash loss on property portfolio restructure 564 -
Other costs following the outcome of strategic review 657 -
Acquisitions - restructuring and integration 2,919 454
Restructuring costs 3,301 1,023
7,826 5,427
Total adjusted items before tax 20,374 16,316
Tax impact (2,217) (1,220)
Total adjusted items 18,157 15,096
Cash adjusting items before tax 23 (#_ftn23) 10,529 5,192
Non-cash loss on disposal of discontinued and the exiting of loss making
categories
Consistent with the Group's ongoing commitment to simplify and streamline
operations as part of the strategic review of loss-making and the exit of
certain categories and territories, on 24 June 2024, the Group announced its
agreement to sell its portfolio of luxury goods websites to the Frasers Group.
The sale completed 11 September 2024. As such, the carrying value of tangible
and intangible assets and inventory have been written down to the expected
consideration value. This has resulted in a one-off, non-cash loss on
disposal.
The comparative position reflects adjustments of the same nature following the
sale of THG Demand in July 2023.
Transportation, delivery and fulfilment costs
The conflict in Israel has resulted in pressures across the international
network and travel routes, with increased costs being experienced as the war
continues, which are not fully passed on to customers. These surcharges are
expected to continue throughout H2 2024 given there is no current indication
of resolution to the ongoing unrest in the region. The Group continues to
insulate the customer from the full impact of these rising costs, with the
residual expense therefore being over and above those incurred through the
normal course of business.
The Group was severely impacted by high surcharges from suppliers in respect
of travel routes travelling through and into Asia during the Covid-19 pandemic
and extended lock down periods. Such costs occurred in H1 23 and have not
recurred in H1 24.
Commissioning - new facilities
Consistent with strategic priorities, the Group has completed its
commissioning of its campus in New Jersey, US. The H1 2024 costs relate to the
final stages of commissioning that were required to enable the warehouse to be
fully operational and work at optimised levels. No further costs are expected
to be incurred.
Decommissioning
As part of the strategic review the Group consolidated acquired warehouses
into the existing THG network. All decommissioning was completed in H2 2023.
Non-cash loss on property portfolio restructure
Following a Group review of properties held within its portfolio, leased
properties no longer in use have been sold or repurposed. Where vacated
properties are retained, unavoidable costs relating to these sites are
incurred over the remaining life of the lease and will continue to be
classified as adjusted items.
Other costs following the outcome of strategic review
As part of the strategic review the Group has consolidated acquired warehouses
into the existing THG network. The costs that have been incurred as part of
this process, include:
• Those incurred to relocate the stock across the fulfilment network.
• Restructuring costs associated with the dual running of facilities,
severance payments and other third party costs such as rent and utilities.
All costs recognised within adjusted items are from the point of management's
decision to exit the acquired warehouse. These costs are considered to be
one-off costs and are incremental to the ongoing trading of the Group. The
majority of these costs have now been incurred.
Acquisitions - restructuring and integration
Costs incurred relate to the integration of Biossance in to the existing THG
network. The nature of these costs are consistent with those set out under
other costs following the outcome of strategic review but have been incurred
from the point of initial acquisition. Given the nature of these costs it is
not unusual for these to span more than one accounting period depending on the
date of acquisition and the time required for the integration to be completed.
Restructuring
Consistent with the strategic review, the Group continues to explore and
implement corporate restructuring and evolve its internal operations where
sustainable alternatives are identified. As part of this, the costs incurred
are primarily attributable to employee related severance as part of specific
operational restructuring projects as efficiencies are implemented across the
business. These plans are expected to be completed within a 12 month period.
4. Income tax
The Group calculates the period income tax expense using the tax rate that
would be applicable to the expected total annual earnings. The major
components of income tax expense in the interim condensed consolidated
statement of comprehensive income are:
Six months ended Six months ended
30 June 2024 30 June 2023
£'000 £'000
Current tax
Tax charge for the period 3,529 6,137
Deferred tax
Origination and reversal of temporary differences (397) (6,070)
Total income tax charge 3,132 67
Uncertain Tax Provisions
The Group has recognised a provision of €2.0m (H1 2023: £nil) for potential
tax liabilities relating to a French tax enquiry in respect of the financial
years ended 2021 and 2022. The provision has been measured using the expected
value method based on the current tax assessment and the likelihood of
different outcomes.
The Group continues to monitor the position consistent with ongoing
procedures. Any adjustment to the provision will be reflected, as necessary,
at the relevant reporting date.
5. Share-based payments
The Group operates a share-based compensation plan, under which the Group
receives services from employees as consideration for equity instruments
(options) of the Company. A total of 30,629,135 shares were issued in the 6
months to 30 June 2024 across two schemes. The shares granted during the
period are as follows:
- On 7 March 2024 a total of 3,685,598 executive options were granted
with 737,120 of these shares only vesting if targets linked to ESG are met.
The remainder of the shares, being 2,948,478, will vest on a straight line
basis subject to certain market performance conditions being met. On 15 March
2024 a total of 22,146,794 options were granted in relation to these schemes.
o 20,376,943 of these awards vest in three equal tranches, with the first
being 31 December following the date of grant. The second and third tranches
for each separate grant will vest on 31 December in the following two years
respectively.
o 1,680,852 of these awards vest in three equal tranches, with the first
being at the date of grant. The second tranche will vest on the 31 December
following the date of grant with the third tranche vesting in the following
year.
o 88,999 of these awards vesting in one tranche on 31 December following the
date of grant
The remaining 4,796,743 shares were issued to the Employee Benefit Trust and
will be utilised for future share grants.
The fair value of the employee services received in exchange for the grant of
the equity instruments is recognised as an expense in the Statement of
Comprehensive Income with the corresponding increase to equity.
Six months ended Six months
30 June ended
2024 30 June
2023
£'000 £'000
Expense arising from equity-settled share-based payment transactions 8,490 7,888
The following table shows the shares granted and outstanding at the beginning
of the year and at half-year:
2024
Number of
shares
As at 1 January 68,718,060
Granted during the year 25,832,392
Exercised during the year (8,365,253)
Forfeited during the year (1,263,141)
As at 30 June 84,922,058
6. Non-current assets
Intangible assets Property, plant and equipment Right-of-use asset
£'000 £'000 £'000
1 January 2024 1,207,383 273,171 303,635
Additions 36,227 17,545 3,747
Disposals - (276) -
Non-cash loss on disposal of discontinued categories (1,232) (80) (193)
Depreciation / Amortisation (57,084) (28,288) (18,953)
Currency translation differences 126 (944) (514)
Reversal of previous impairment 1,175 - -
Transfers (1,311) 2,247 (936)
30 June 2024 1,185,284 263,375 286,786
Intangible assets Property, plant and equipment Right-of-use asset
£'000 £'000 £'000
1 January 2023 1,275,760 360,041 294,309
Additions 43,308 15,933 5,942
Disposals (25) (46,729) -
Non-cash loss on disposal of discontinued categories - (2,312) -
Depreciation / Amortisation (61,335) (26,201) (19,726)
Transfer to assets held for sale - (1,100) -
Currency translation differences (32,794) (1,050) 918
30 June 2023 1,224,914 298,582 281,443
Disposals included the planned sale of three non-core freehold properties
which gave rise to other operating expenses of £15.1m in the 6 months to June
2023.
IAS 36 states that an entity is required to assess at each reporting date
whether there are any indications of impairment, with an impairment test
itself being carried out if there are such indications. Goodwill and
indefinite life assets are also required to be tested annually for impairment.
The Group's impairment review is undertaken annually in Q4.
In assessing whether there are impairment triggers at the reporting date,
management has taken into account economic performance including macroeconomic
factors that have impacted the markets in which the Group operates. Whist
there has been a decline in overall revenues, this is driven by weaker than
anticipated D2C sales of THG Nutrition. Despite this, management remain
confident that future financial budgets and growth rates remain reasonable and
that there is no reasonably possible change to the key assumptions applied in
the full impairment review performed at 31 December 2023, and as disclosed in
note 11 of the Group's annual accounts, which would lead to an impairment.
Management have not identified any further impairment triggers.
6.1 Assets held for sale
In July 2023, the sale of trade and assets of THG OnDemand was completed. In
accordance with IFRS 5: Non-current assets held for sale and discontinued
operations, assets were classified as held for sale on the Group statement of
financial position at 30 June 2023.
7. Financial assets and liabilities
30 June 2024 30 June 2023 31 December
2023
£'000 £'000 £'000
Assets as per balance sheet - financial assets
Trade and other receivables excluding non-financial assets 138,674 139,213 147,686
Cash and cash equivalents 287,711 392,546 416,162
Investments 1,400 1,400 1,400
Assets as per balance sheet - held at fair value through OCI
Derivative financial instruments designated as hedging instruments 13,431 22,910 9,613
Derivative financial instruments held at fair value through profit and loss 300 300 301
441,516 556,369 575,162
Liabilities as per balance sheet - other financial liabilities at amortised
cost
Bank borrowings 640,522 671,884 650,037
Lease liabilities 334,728 321,312 344,977
Trade and other payables excluding non-financial liabilities 496,920 461,115 553,656
Liabilities as per balance sheet - other financial liabilities at fair value
Derivative financial instruments designated as hedging instruments 45,671 15,974 19,763
1,517,841 1,470,285 1,568,433
Derivative financial instruments designated as hedging instruments
FX forwards hedging foreign exchange risk on borrowings (19,763)
(40,351) (15,974)
Interest rate swaps 5,255 17,988 7,999
FX forwards hedging foreign exchange risk on highly probable future cash flows 2,855 4,921 1,615
(32,241) 6,935 (10,149)
- Financial instruments included within current assets and liabilities,
excluding borrowings, are generally short-term in nature and accordingly their
fair values approximate to their book values. Bank borrowings are initially
recorded at fair value net of direct issue costs.
- The derivative financial instruments designated as hedging
instruments have been recognised at fair value through Other Comprehensive
Income. Hedging instruments are valued based on significant observable inputs
and have been classified at Level 2 hierarchy level in line with IFRS 13 Fair
Value Measurement.
Net debt consists of loans and lease liabilities, less cash and cash
equivalents. For the purposes of the Group's net debt calculation, loans that
are denominated in foreign currency are translated at the effective hedged
rate where applicable. A reconciliation to the most directly comparable IFRS
measure is included below:
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Loans and other borrowings (640,522) (671,884) (650,037)
Lease liabilities (334,728) (321,312) (344,977)
Cash and cash equivalents 287,711 392,546 416,162
Sub-total (687,539) (600,650) (578,852)
Adjustments:
Retranslate debt balance at swap rate where hedged by FX derivatives 2,265 11,074 15,653
Net debt (685,274) (589,576) (563,199)
Net debt before lease liabilities (350,546) (268,264) (218,222)
8. Cash flow generated from operations
Six months ended Six months ended
30 June 30 June
2024 2023
Note £'000 £'000
Loss before taxation (118,098) (133,016)
Adjustments for:
Depreciation 6 47,241 45,927
Amortisation 6 32,758 35,832
Amortisation - acquired intangibles 6 24,326 25,503
Share-based payment 5 8,490 7,888
Adjusted items 3 20,374 16,316
Other operating expense 6 - 15,081
Net finance costs 33,682 33,564
Operating cash flow before adjusted items and before movements in working 48,773 47,095
capital and provisions
(Increase) / Decrease in inventories (10,464) 33,188
(Increase) / Decrease in trade and other receivables 27,922 (5,497)
Decrease in trade and other payables (90,126) (86,780)
Decrease in provisions (1,697) (1,448)
Foreign exchange loss (15) (265)
Cash used in operations before adjusted items (25,607) (13,707)
9. Provisions
Dilapidations Other Total
£'000 £'000 £'000
At 1 January 2024 23,084 2,884 25,968
Utilisation (210) (936) (1,146)
Interest 108 - 108
Created 1,762 - 1,762
Released (1,383) - (1,383)
FX on translation (343) - (343)
At 30 June 2024 23,018 1,948 24,966
Current 3,983 1,737 5,720
Non-current 19,035 211 19,246
Dilapidations provisions relate to leased properties. Dilapidations provisions
are made based on the best estimate of the likely committed cash outflow and
discounted to net present value. Future costs are expected to be incurred over
the term of the existing lease arrangements at the reporting date, which is a
period of up to 25 years.
Other provisions relate to onerous contracts and unavoidable costs on vacated
properties.
10. Related Party Transactions
Moulding Capital Limited ("Propco") is wholly owned by the Group's CEO. Propco
owns property assets occupied and utilised by THG and its operating
businesses.
The Group has in place an agreement on commercial terms with Moulding Capital
Limited to provide property, facilities and project management services to the
entity and its subsidiaries. This agreement generated £79,387 (H1 2023:
£90,693) for the Group recognised within administrative expenses.
The amounts recognised on the Group's balance sheet and in the income
statement in relation to the leases with Propco in the period are as follows:
30 June 2024 30 June 2023
£'000 £'000
Right-of-use asset 149,784 156,864
Lease liability 170,456 175,297
Depreciation arising on right-of-use assets 4,712 6,673
Expense recognised in financing costs 3,488 3,687
The table below gives further detail around the leases in place:
Number of properties Residual lease term at date of divestment H1 2024 rent (£'000) H1 2023 rent (£'000)
9 0-5 years 481 481
0 5-10 years - -
12 10-15 years 1,643 1,643
7 15-25 years 4,961 4,961
28 7,085 7,085
The following table sets out amounts payable to related parties which include
balances in relation to lease agreements and where the Group has paid
suppliers on behalf of the Propco Group, or vice versa. Such situations arise
due to Propco suppliers using legacy details to submit invoices or where
payments are made on behalf of THG by Propco for property-related costs
rechargeable to THG as a tenant per lease:
Amount owed by related parties Amounts owed to related parties
£'000 £'000
Aghoco 1422 Ltd - 59
Allenby Square Ltd - 115
THG Gadbrook PropCo Ltd - 1
THG GJS PropCo Ltd - 198
THG Icon S.à.r.l - 2
THG KS PropCo Ltd 26 -
THG Alpha PropCo Ltd - 4
MCL Omega PropCo Ltd - 14
26 393
11. Events after the reporting period
On 24(th) June 2024, the Group announced a strategic partnership with the
Frasers Group. As part of this arrangement, THG agreed to sell its portfolio
of luxury goods websites, including Coggles, to the Frasers Group. The sale
completed 11 September 2024. At 30(th) June 2024, the Group have impaired the
assets sold to reflect their recoverable value, equal to consideration. Refer
to note 3 - Adjusted items.
Principal risks and uncertainties
The Board considers that the principal risks and uncertainties which could
impact the Group over the remaining six months of the financial year to 31
December 2024 to be unchanged from those set out in the Annual Report and
Accounts for the year to 31 December 2023.
The applicable risks are summarised as follows:
· Cyber security and data privacy;
· Third party reliance;
· Talent;
· Ingenuity e-commerce platform;
· Customer needs;
· Infrastructure and supply chain;
· Innovation;
· Legal and regulatory compliance;
· Product safety and quality;
· Health and safety;
· Climate change, environmental and social responsibility;
· Geopolitical and economic uncertainty;
· Culture;
· Liquidity and funding; and
· Strategic optionality.
These are set out in detail from page 90 in the Group's Annual Report and
Accounts for the year to 31 December 2023, a copy of which is available on the
Group's website, www.thg.com.
INDEPENDENT REVIEW REPORT TO THG PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2024, which comprises the interim condensed consolidated statement of
comprehensive income, interim condensed consolidated statement of financial
position, interim condensed consolidated statement of changes in equity and
interim condensed consolidated statement of cashflows and the related
explanatory notes. We have read the other information contained in the half
yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2024 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
16 September 2024
1 (#_ftnref1) During H2 2023 and H1 2024, certain loss making categories and
territories have been or are subject to exit. H1 2024 include these as
discontinued, with the H1 2023 results being restated for comparative purposes
2 (#_ftnref2) YoY change defined as year-on-year
3 (#_ftnref3) CCY defined as constant currency basis with prior year
comparatives recalculated using the applicable current period rate and
adjusting for the impact of hedge instruments
4 (#_ftnref4) Group (continuing) refers to before discontinued categories
(see note 2). Discontinued categories do not represent a discontinued
operation under the accounting standard
5 (#_ftnref5) Adjusted EBITDA before discontinued categories
6 (#_ftnref6) Adjusted EBITDA is defined as operating profit before
depreciation, amortisation, share-based payment expense, other operating
expense - non-cash loss on disposal freehold assets and adjusted items
7 (#_ftnref7) See CFO report for a reconciliation to adjusted EBITDA
8 (#_ftnref8) Net debt is cash and cash equivalents less debt before lease
liabilities, on a hedged basis (see note 7)
9 (#_ftnref9) Adjusted EBITDA range of £133.8m to £156.5m as dated
22.07.24 and available at Analyst Consensus - THG.com
(https://www.thg.com/investor-relations/analyst-consensus)
10 (#_ftnref10) Revenue has been recategorised in the prior year between
continued and discontinued to reflect loss making categories and territories
which have been or are subject to exit
11 (#_ftnref11) Underlying cash generation excludes the impact of
acquisitions and disposals
12 (#_ftnref12) Last Twelve Months
13 (#_ftnref13) Source: YouGov custom brand tracker (sample of 3,000 UK
women aged 16-55 interested in beauty and skincare)
14 (#_ftnref14) Monthly Recurring Revenue comprises Software-as-a-Service
license fees, managed service fees, revenue share, fulfilment and creative
services
15 (#_ftnref15) The table shows financial results for gross profit,
distribution costs and administrative costs before the impact of adjusted
items, depreciation, amortisation and share-based payments. The impact is as
follows:
- For statutory presentation gross profit includes charges
of £8.9m (H1 2023: £7.2m) for adjusted items and £15.4m (H1 2023: £9.6m)
for amortisation and depreciation.
- For statutory presentation distribution costs include
charges of £3.7m (H1 2023: £3.7m) for adjusted items and £11.7m (H1 2023:
£8.8m) for amortisation and depreciation.
- For statutory presentation administrative costs include
charges of £7.8m (H1 2023: £5.4m) for adjusted items and £77.1m (H1 2023:
£88.9m) for amortisation and depreciation and £8.5m (H1 2023: £7.9m) for
share-based payments.
The comparative for EBITDA losses from discontinued categories, continuing
adjusted EBITDA and continuing adjusted EBITDA % have been restated to reflect
the H2 2023 and H1 12024 exit of loss making categories and territories.
16 (#_ftnref16) Free cash flow is defined as total cash flow for the Group
adjusting for debt (repayments) / proceeds and acquisition cash flows
17 (#_ftnref17) The exit of certain loss making categories and territories
do not meet the criteria under IFRS 5: Discontinued operations as these are
not major components of the Group as defined by the accounting standard,
however, to provide further information on the ongoing revenue and Adjusted
EBITDA of the Group the results of these operations has been presented
separately in the above table, with H1 2023 results for THG Beauty and THG
Nutrition being restated for comparative purposes.
18 (#_ftnref18) THG Beauty restated for the impact of discontinued
categories
19 (#_ftnref19) Average order value
20 (#_ftnref20) THG Nutrition restated for the impact of discontinued
categories
21 (#_ftnref21) Cash adjusting items before tax total £10.5m (H1 2023:
£5.2m) reflect the total cash before tax expected to be paid. This can differ
from the interim condensed consolidated statement of cash flows which also
reflects the timing of such payments. Cash paid in H1 2024 totaled £10.5m.
22 (#_ftnref22) The exit of certain loss making categories and territories
do not meet the criteria under IFRS 5: Discontinued operations as these are
not major components of the Group as defined by the accounting standard,
however, to provide further information on the ongoing revenue and Adjusted
EBITDA (being of the Group the results of these operations has been
presented separately in the above table, with H1 2023 results for THG Beauty
being restated by £36.1m and THG Nutrition being restated by £4.0m for
comparative purposes to include categories which have been discontinued in H2
2023 and H1 2024.
23 (#_ftnref23) Cash adjusting items before tax total £10.5m (H1 2023:
£5.2m) reflect the total cash before tax expected to be paid. This can differ
from the interim condensed consolidated statement of cash flows which also
reflects the timing of such payments. Cash paid in H1 2024 totaled £10.5m.
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